updated 05:10 pm EDT, Thu November 4, 2010

Clearwire starts major job cuts, stops phone plans

Clearwire today reported major losses that prompted it to take dramatic action and conserve its resources. After a net loss of $564.6 million, the 4G service said it would take "cash conservation measures" and cut 15 percent of its entire workforce. The plan will also see it delay plans for its own smartphones and stop development of future retail stores. It characterized itself as an "early-stage" network for whom losses were part of its growth phase, but it also warned that problems were immediate and that there were no guarantees it could survive past mid-2011.

"[While Clearwire] is cautiously optimistic it will resolve its short-term funding needs in the near future, there can be no assurances," it said.

Multiple options were on the table, including equity financing, selling off assets and taking on more debt. Possible "strategic transactions" might also arise, which might include selling spectrum to rivals. Clearwire has floated the possibility of deals with T-Mobile, but nothing has emerged beyond talks.

The crunch came in spite of record subscriber additions. Just over 1.22 million subscribers signed up for Clearwire's WiMAX service in the summer, drawn in by both the 3-6Mbps average speeds and by the unlimited bandwidth. Other major carriers, except for T-Mobile, usually cap their 3G data at 5GB before overage fees start.

The crisis could have a ripple effect on Sprint, which not only has a 54 percent stake in Clearwire but has been depending on its partner to help build out a national 4G network before Verizon and others could do the same. Sprint is officially committed to WiMAX, but it could lose an early advantage. Sprint executives recently left Clearwire's board of directors and recently fueled suspicion, later denied, that it was losing trust.

All of Clearwire's business until now has focused on modems and routers, but its presence has directly helped Sprint finally regain subscribers by creating a foundation for 4G Android smartphones like the Evo 4G and Epic 4G.

Sprint

Why doesn't Sprint just buy ClearWire out completely? If they're committed to WiMAX as much as they say they are, that would be the solid proof of that. Until then, I believe Sprint is hedging they're bets.